Prepared for Cisco Systems
March 2008
The Total Economic Impact™ Of
Cisco Unified Wireless Network
Migration
Project Director: Sadaf Roshan Bellord, Consultant
Total Economic Impact Study of Unified Wireless Network
TABLE OF CONTENTS
Executive Summary ............................................................................................................................... 3
Purpose .............................................................................................................................................. 3
Methodology....................................................................................................................................... 3
Approach ............................................................................................................................................ 3
Key Findings ...................................................................................................................................... 4
Disclosures......................................................................................................................................... 6
Unified Wireless Network: Overview...................................................................................................... 7
Interview Highlights............................................................................................................................ 8
TEI Framework .................................................................................................................................. 9
Costs ................................................................................................................................................10
Benefits ............................................................................................................................................14
Risk...................................................................................................................................................19
Flexibility...........................................................................................................................................21
TEI Framework: Summary...............................................................................................................22
Study Conclusions................................................................................................................................23
Appendix A: Total Economic Impact™ Overview ...............................................................................24
Benefits ............................................................................................................................................24
Costs ................................................................................................................................................24
Risk...................................................................................................................................................24
Flexibility...........................................................................................................................................24
Appendix B: Glossary...........................................................................................................................25
© 2008, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, and Total
Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective
companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is
strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on
best available resources. Opinions reflect judgment at the time and are subject to change.
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Total Economic Impact Study of Unified Wireless Network
Executive Summary
In February 2008, Cisco Systems commissioned Forrester Consulting to examine the total
economic impact and potential return on investment (ROI) that enterprises may realize by migrating
to a Cisco Unified Wireless Network. A Cisco Unified Wireless Network allows organizations to
standardize and centrally manage all of the various elements within their wireless network. This
study illustrates the financial impact of migrating to a controller-based, or centrally managed,
wireless architecture for an organization that previously deployed and managed autonomous
wireless solutions.
Forrester conducted in-depth interviews with four existing Cisco customers that had recently
migrated from autonomous wireless solutions to a centrally managed, wireless architecture. The
purpose of the interviews was to understand the key drivers for migration and to quantify the IT and
business benefits. Forrester found that as a result of the migration, the organizations achieved
operational cost savings including: improved network security, reduced on-going administration
costs, improved end-user productivity, and improved third-party guest access.
Purpose
The purpose of this study is to provide readers with a framework to evaluate the potential financial
impact of Cisco Unified Wireless Network on their organizations. Forrester’s aim is to clearly show
all calculations and assumptions used in the analysis. Readers should use this study to better
understand and communicate a business case for investing in Cisco’s Unified Wireless Network.
Methodology
Cisco selected Forrester for this project because of its industry expertise in wireless networking
technology and Forrester’s Total Economic Impact™ (TEI) methodology. TEI not only measures
costs and cost reduction (areas that are typically accounted for within IT) but also weighs the
enabling value of a technology in increasing the effectiveness of overall business processes.
For this study, Forrester employed four fundamental elements of TEI in modeling controller-based,
or centrally managed, wireless network infrastructure solutions:
1. Costs and cost reduction.
2. Benefits to the entire organization.
3. Risk.
4. Flexibility.
Given the increasing sophistication that enterprises have regarding cost analyses related to IT
investments, Forrester’s TEI methodology serves an extremely useful purpose by providing a
complete picture of the total economic impact of purchase decisions. Please see Appendix A for
additional information on the TEI methodology.
Approach
Forrester used a five-step approach for this study:
1. Forrester gathered data from existing Forrester research relative to mobility services and
the wireless LAN market, in general.
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Total Economic Impact Study of Unified Wireless Network
2. Forrester interviewed Cisco marketing and technical sales teams to fully understand the
potential (or intended) value proposition of Cisco Unified Wireless Network.
3. Forrester conducted a series of in-depth interviews with four organizations currently using
Cisco Unified Wireless Network infrastructure.
4. Forrester constructed a financial model representative of the interviews. This model can be
found in the TEI Framework section below.
5. Forrester created a composite organization based on the interviews and populated the
framework using data from the interviews as applied to the composite organization.
Key Findings
Forrester’s study yielded several key findings:
•
ROI. Based on the interviews with four existing customers, Forrester constructed a TEI
framework for a composite organization and the associated ROI analysis illustrating the
financial impact areas. As seen in Table 1, the risk-adjusted ROI for our composite
company is 92% with a breakeven point (payback period) after deployment of 15 months.
•
Benefits. The organizations that we interviewed migrated to the centrally managed,
wireless architecture where access points are connected to a central controller for ease of
management and consistency of performance to reduce the operational cost of managing
their wireless implementations previously based on standalone or autonomous access
points. By standardizing and centrally managing the wireless network, they have reduced
on-going administrative costs, reduced site monitoring costs associated with RF monitoring
and rogue detection, improved end-user productivity, and reduced the IT effort to assign
and monitor guest access. The present value (PV) of the risk-adjusted total benefits is
equal to $647,529.
•
Costs. The cost to migrate from autonomous wireless solutions to a centrally managed,
wireless architecture includes: the incremental cost to upgrade non-software upgradeable
access points, the cost to implement controllers to centrally manage access points, the
software license fees to implement wireless control system (WCS), and initial and on-going
administrative costs. The PV of the risk-adjusted total costs equates to $337,086. The
reader should note that the Cisco product costs are list prices and do not include any
discounts.
Table 1 illustrates the risk-adjusted cash flow for the composite organization, based on data and
characteristics obtained during the interview process. Forrester risk-adjusts these values to take
into account the potential uncertainty that exists in estimating the costs and benefits of a technology
investment. The risk-adjusted value is meant to provide a conservative estimation, incorporating
any potential risk factors that may later impact the original cost and benefit estimates. For a more
in-depth explanation of risk and risk adjustments used in this study, please see the Risk section.
(Note: numbers have been rounded throughout this document.)
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Total Economic Impact Study of Unified Wireless Network
Table 1: Financial Summary Result, Composite Company ROI, Risk-Adjusted
Summary financial
results
Original estimate
ROI
Risk-adjusted
113%
92%
14
15
($337,888)
($337,086)
Total benefits (PV)
$719,475
$647,529
Total (NPV)
$381,587
$310,443
Payback period (months)
Total costs (PV)
Source: Forrester Research, Inc.
Figure 1: Financial Summary Result
Financial Summary Result
$400,000
$300,000
$200,000
$100,000
$0
Initial
Year 1
Year 2
Year 3
Total costs
Total benefits
Payback
($100,000)
($200,000)
($300,000)
($400,000)
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Disclosures
The reader should be aware of the following:
•
The study is commissioned by Cisco Systems and delivered by the Forrester Consulting
group.
•
Cisco reviewed and provided feedback to Forrester, but Forrester maintained editorial
control over the study and its findings and did not accept changes to the study that
contradicted Forrester’s findings or obscured the meaning of the study.
•
The customer names for the interviews were provided by Cisco.
•
Forrester makes no assumptions as to the potential return on investment that other
organizations will receive. Forrester strongly advises that readers should use their own
estimates within the framework provided in the report to determine the appropriateness of
an investment in Unified Wireless Network.
•
This study is not meant to be used as a competitive product analysis.
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Total Economic Impact Study of Unified Wireless Network
Unified Wireless Network: Overview
According to Cisco, Unified Wireless Network infrastructure delivers cost-effective, secure wireless
access for business-critical mobility anytime, anywhere. The solution uses Cisco Aironet lightweight
access points in conjunction with a Cisco Wireless LAN Controller and the Cisco Wireless Control
System (WCS) to provide secure, high-performance wireless LANs (WLANs).
Forrester’s research revealed:1
“Cisco offers a comprehensive solution of standalone, centrally managed, and hybrid
access points to complement its strategy with offerings scaling from small and medium-size
business (SMB) to data-center-class. In addition, offering full suite of voice hardware and
software and having developed the only location appliance of vendors considered, Cisco
spans the full spectrum of WLAN components. The vendor's monolithic size and premiumpriced offerings are ideal for large enterprises looking for a one-vendor solution and
organizations with a considerable, existing Cisco investment looking for the opportunity to
standardize and centrally manage all network elements both wired and wireless.”
The interviewed organizations migrating to Unified Wireless Network completed the following
three components:
Migrate to Lightweight Access points
Cisco offers free software to upgrade existing 802.11 a/b/g standalone access points to operate as
802.11 a/b/g lightweight access points. Aironet access points that cannot be migrated using free
software upgrade offerings can be traded out for new Cisco Aironet 802.11a/b/g and 802.11n
lightweight access points as part of a normal or accelerated access point refresh cycle. Cisco
provides a variety of single- and dual-band lightweight access points for indoor office environments,
challenging RF environments, and the outdoors. The customers interviewed have implemented a
combination 1130 and 1240 Aironet access points throughout their campuses for Voice over WLAN
(VoWLAN) wireless VoIP and WLAN-based location-based services.
Implement Wireless LAN Controllers
Wireless LAN controllers provide systemwide services such as access point configuration, security
policies, intrusion prevention, radio frequency (RF) management, and monitoring network quality of
service (QoS). Controllers are most often deployed in an N+1 or N=n arrangement where N equals
the base controller number and the corresponding “=” number indicates the number of redundant
controllers for failover.
Implement Wireless Control System (WCS)
Cisco WCS allows network managers to design, control, and monitor the wireless network from a
centralized location. Cisco WCS includes a graphical user interface (GUI) that supports
centralized RF prediction and corresponding access point placement, policy provisioning,
troubleshooting, user tracking, security monitoring, and wireless LAN systems management. With
a license upgrade, Cisco WCS also supports real-time spectrum intelligence to detect, classify,
and locate devices that are causing RF interference. Quick detection of interfering devices
improves network performance, coverage, and security.
1
“Cisco Systems Captures The Enterprise Market For WLAN Infrastructure” April 4, 2007 by Chris Silva
http://www.forrester.com/Research/Document/0,7211,41791,00.html.
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Total Economic Impact Study of Unified Wireless Network
Analysis
As stated in the Executive Summary, Forrester took a multistep approach to evaluate the impact
that implementing Unified Wireless Network can have on an organization:
•
Interviewing Cisco Systems’ marketing and technical sales teams.
•
Conducting in-depth interviews of four organizations currently using Unified Wireless
Network infrastructure.
•
Constructing a common financial framework to illustrate the costs and benefits associated
with the migration.
•
Constructing a composite organization based on characteristics of the interviewed
organizations.
Interview Highlights
A total of four interviews were conducted for this study, involving representatives from the following
companies:
1. Fortune 500 automobile manufacturer.
2. Global medical devices manufacturer.
3. A not-for-profit foundation for medical education and research with approximately 2,500
physicians and scientists.
4. A regional not-for-profit healthcare provider operating more than 20 hospitals.
The four in-depth interviews revealed:
•
By centrally managing the wireless network infrastructure components, interviewees
reduced administrative costs associated with day-to-day wireless network management.
Releasing service set identifier (SSID) updates and/or configuration from a central location
allows network administrators to reduce travel time between offices and eliminate the
troubleshooting effort required to detect human errors caused by the annual roll out of
manual access point updates.
•
Using the offered functionality, interviewees are proactively monitoring and detecting
wireless issues, and in most instances, resolving them before end-users experience a
failure. This reduces calls to the help desk.
•
By using the “lobby ambassador” feature, organizations can specify a period that a guest
account remains active and other guest access account parameters centrally while allowing
administrative “front desk” staff to issue login credentials to guests. Interviewees indicated
that this allows them to reduce IT staff time to track guest access. Interviewees also
improved guest productivity for third-party visitors such as lawyers, auditors, consultants,
and contractors by allowing them to have high speed wireless guest access as a
replacement for expensive analog lines or carrier-based broadband connections to the
desk.
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Total Economic Impact Study of Unified Wireless Network
•
Mitigating security risk was another major catalyst for migrating to a centrally managed,
wireless architecture. By allowing the system to detect and shut down rogue access points,
organizations can proactively find and eliminate potential security or ad hoc interferences;
which is critical in many organizations especially where compliance with data security
standards is concerned. It also simplifies any investigation effort and reduces the costs
associated with periodic site survey audits.
TEI Framework
Introduction
From the information provided in the in-depth interviews, Forrester has constructed a TEI
framework for those organizations considering implementation of a Cisco Unified Wireless Network.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that impact
the investment decision.
Composite Organization
Based on the interviews with the four existing customers provided by Cisco, Forrester constructed a
TEI framework, a composite company, and an associated ROI analysis that illustrates the areas
impacted financially:
•
The composite organization that Forrester synthesized from these results represents a USbased organization with 5,000 employees.
•
Prior to migration, the total number of access points reached 750 distributed across four
campuses: 500 access points in headquarters, and 100, 100, and 50 in each of three
regional campuses. The organization expects to use WLAN-based voice and location
services in the future.
•
Two years ago, the organization’s IT staff migrated its WLAN deployment from autonomous
wireless solutions to a centrally managed, wireless architecture. By centrally managing the
implementation, the organization gained operational efficiency within IT and its business
units. To complete the migration, the organization used the free software to upgrade its
existing 700 802.11a/b/g standalone access points to operate as 802.11a/b/g lightweight
access points. The remaining 50 Aironet access points that could not be migrated using the
free software upgrade were traded in for new Aironet 802.11 a/b/g lightweight access
points.
Framework Assumptions
Table 2 lists the discount rate used in the PV and NPV calculations and time horizon used for the
financial modeling.
Table 2: General Assumptions
General assumptions
Value
Discount rate
10%
Length of analysis
Three years
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Organizations typically use financial discount rates (the interest rate used in cash flow analysis)
between 8% and 16%, based on their current environment. Readers are urged to consult with the
finance department to determine the most appropriate discount rate to use within their own
organizations.
In addition to the financial assumptions used to construct the cash flow analysis, Table 3 provides
salary assumptions used within this analysis.
Table 3: Salary Assumptions
Ref.
Metric
Calculation
Value
A1
Hours per week
40
A2
Weeks per year
52
A3
Hours per year (M-F, 9-5)
2,080
A4
Hours per year (24x7)
8,736
A5
Fully-loaded annual salary for network administrator
A6
Hourly
$100,000
(A5/A3)
$48
Source: Forrester Research, Inc.
Costs
This section exhibits the overall investment in a Cisco Unified Wireless Network based on the
characteristics of the composite organization. Costs include the investment to: 1) upgrade nonsoftware-upgradeable Aironet access points to lightweight access points; 2) implement WLAN
controllers; 3) deploy WCS; and 4) initial and on-going administrative costs.
Total Access Point Costs
For organizations that are migrating to a Unified Wireless Network, Cisco offers free software to
upgrade existing 802.11 a/b/g standalone access points to operate as 802.11 a/b/g lightweight
access points. In some instances, an organization may have Aironet access points that cannot be
migrated using the free software. At that time, the organization is required to purchase new Aironet
802.11 a/b/g or 802.11n access points to complete the migration. The list price for 1130 and 1240
models are $699 and $899, respectively. The list price for Aironet 1250s is $1299.
Forrester assumes that the composite organization has a total of 750 existing access points. The
composite organization has 50 Aironet access points that cannot be migrated using the free
software. The organization trades these access points for lightweight Aironet 802.11 a/b/g models.
To calculate the incremental cost required to replace non-software upgradeable access points, we
applied an average cost of $799 (($699+$899)/2) per access point. Table 4 shows the cost of
$39,950 (50 access points*$799 per access point).
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Total Economic Impact Study of Unified Wireless Network
Table 4: Total Access Point Costs
Ref.
Metric
Calculation
Initial
B1
New access points purchased
50
B2
Average cost per access point
$799
Bt
Total costs of access points
B1*B2
$39,950
Source: Forrester Research, Inc.
Total Controller Costs
Cisco Wireless LAN Controllers are another component of the Cisco Unified Wireless Network and
deliver services simultaneously to all access points. To assess the costs of controller
implementation, Forrester assumes that the composite organization distributes the following access
point breakdown across its four campuses: 500, 100, 100, and 50. We assume that the composite
organization uses two types of controllers: WiSM and 4400-100 series.
The WiSM and 4400-100 controller can manage up to 300, and 100 access points, respectively.
With an average list price of $45,995 for WiSM and $34,995 for 4400-100 controllers, we applied
the following controller distribution: two WiSMs to manage the 500 access point campus, three
4400-100 controllers for campuses with access points varying from 50 to 100, and one additional
WiSM controller for backup (n+1 environment); allowing additional capacity to accommodate future
access point expansion. Table 5 illustrates this calculation.
Table 5: Total Controller Costs
Ref.
Metric
Calculation
Per period
C1
Total WiSM controllers purchased
3
C2
Total 4400-100 controllers purchased
3
C3
Cost per controller (WiSM)
$45,995
C4
Cost per controller (4400-100)
$34,995
Ct
Total cost to implement controllers
C1*C3+C2*C4
$242,970
Source: Forrester Research, Inc.
WCS Licensing Costs
Cisco WCS allows network managers to design, control, and monitor the wireless network from a
centralized location. Cisco offers licenses for 100, 500, 1000, 2500, 10000, and 50000 access
points. We chose the option to purchase one license for 1000 access point for the list price of
$46,950 to accommodate any future expansion. The 2500, 10000, and 50000 enterprise licenses
also include WCS Navigator, a utility to manage multiple WCS management stations. Table 6
demonstrates this calculation.
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Total Economic Impact Study of Unified Wireless Network
Table 6: WCS Licensing Costs
Ref.
Metric
D1
WCS license fees
D2
Number of licenses
Dt
WCS License Fees
Calculation
Per period
$46,950
1
D1*D2
$46,950
Source: Forrester Research, Inc.
Initial And On-Going Administrative Costs
The final component of cost to migrate to the Cisco Unified Wireless Network solution is the
administrative time associated with: 1) the initial set-up of controllers, WCS implementation, and
replacement of any new access points, and 2) the on-going management of the wireless network.
We assume that the composite organization purchased six controllers; five will be used to manage
existing access points within the four campuses, and one will be used as a failover controller
deployed redundantly. We estimate that the network administrator is required to spend four hours to
set up each controller and spends another eight hours replacing non-upgradeable access points
and setting up the WCS. To estimate the on-going effort requirements after migration, we assume
that the composite organization needs to perform three access point configuration updates
annually. The interviewees revealed that the network administrators spent an hour per week on
network monitoring, and 30 minutes on each access point configuration update annually. By
eliminating the manual access point updates, the organizations that we interviewed were able to
significantly reduce the time required to troubleshoot wireless network issues resulting from human
error. We estimate benefits gained in the next section. Here, we calculate the cost associated with
initial and on-going administrative effort to set-up and manage the controller-based, wireless
architecture. Table 7 presents this calculation.
Table 7: Initial And On-Going Administrative Costs
Ref.
Metric
E1
Number of network admin.
E2
Fully loaded hourly rate
E3
Number of hours
E4
Calculation
Initial
Year 1
Year 2
Year 3
1
1
1
1
$48
$48
$48
$48
34
52
52
52
Annual number of update and/or
configuration per access point
0
3
3
3
E5
Average time to set up the
controller for each update (hour)
0
0.50
0.50
0.50
Et
Initial and on-going
administrative cost
$1,632
$2,568
$2,568
$2,568
E2*(E1*E3+E4*E5)
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Total Costs
Table 8 illustrates the total costs for the composite organization to migrate to the Cisco Unified
Wireless Network solution.
Figure 2: Total Costs – Non-Risk-Adjusted
Costs, Original Estimates
(Present Values)
WCS license fees
($46,950), 14%
Initial and on-going
adminitrative cost
($8,018), 2%
Total costs of access points
replaced
($39,950), 12%
Total cost to implement
controllers
($242,970), 72%
Source: Forrester Research, Inc.
Table 8: Total Costs, Non-Risk-Adjusted
Costs
Total costs of access points
replaced
Initial
Year 1
Year 2
Year 3
Total
Present
value
($39,950)
0
0
0
($39,950)
($39,950)
($242,970)
0
0
0
($242,970)
($242,970)
WCS license fees
($46,950)
0
0
0
($46,950)
($46,950)
Initial and on-going
administrative cost
($1,632)
($2,568)
($2,568)
($2,568)
($9,336)
($8,018)
($331,502)
($2,568)
($2,568)
($2,568)
($339,206)
($337,888)
Total cost to implement
controllers
Total costs
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Benefits
The next component of this analysis examines the potential benefits of migrating to a controllerbased, wireless architecture. Interviewed customers identified the following benefits associated with
the Cisco Unified Wireless Network: 1) reduction in on-going administrative costs; 2) reduction in
site monitoring costs associated with RF monitoring and rogue detection; 3) improvement in enduser productivity; and 4) reduction in guest access costs. This section illustrates the possible ways
to quantify the impact of these benefits based on the characteristics of the composite organization.
Operational Cost Savings
The organizations that we interviewed migrated to a centrally managed, wireless architecture to
reduce the operational and administrative costs of managing a wireless network. For these
organizations, the wireless network is a business critical application. Customers interviewed either
used voice and/or location services or were seriously considering an investment in one or both.
As the interviewees grew their autonomous wireless footprint, they realized that to proactively
maintain their network, they needed to increase the number of network administrators. With IT
operating budgets tightening, the migration to a centrally managed, wireless architecture provided
the opportunity to maintain and grow wireless network without incurring the cost to hire additional
staff.
To calculate this benefit, we assume that the composite organization implemented 750 access
points across four campuses. Based on the interviewees, we estimate that the network
administrators were required to annually perform three access point configurations manually. Each
access point update would require 15 minutes to complete and log. In addition to these updates, the
network administrators also spent on average eight hours per week troubleshooting and completing
wireless audits per location. With an average fully loaded hourly salary of $48 ($100,000/2080) for
network administrators, we estimate a cost savings of $106,872 annually ($48*(750*3*.25+8*4*52)).
Table 9 illustrates this calculation.
Table 9: On-Going Administrative Cost Savings
Ref.
Metric
Calculation
Per period
F1
Total number of access points
750
F2
Annual number access point updates or configurations
F3
Average time required to update each access point (hour)
0.25
F4
IT staff fully loaded hourly rate
$48
F5
Number of hours per week to troubleshoot and complete
wireless audits per location prior to migration
8
F6
Number of locations
4
F7
Weeks per year
Ft
Reduction in on-going administrative cost
3
52
F4*(F1*F2*F3
+F5*F6*F7)
Source: Forrester Research, Inc.
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$106,872
Total Economic Impact Study of Unified Wireless Network
The offering’s security enhancement feature enabled interviewees to monitor, detect, and shut
down rogue access points. The system adjusts coverage using access point transmission control
automatically and provides consistent availability. Based on the interviews, we estimate that the
composite organization will perform two site surveys annually at each of its four locations at a cost
of $10,000 per survey. After migration, the organization reduced the number of surveys per location
by 50%. Table 10 presents the annual cost savings of $40,000 (4*2*50%*$10,000).
Table 10: Reduction In Site Survey Costs To Mitigate Security Risk
Ref.
Metric
Calculation
Per period
G1
Total number of sites surveyed
4
G2
Number of scheduled site surveys
2
G3
Reduction in site surveys
G4
Site survey costs
Gt
Reduction in on-going RF monitoring and rogue access
point detection
50%
$10,000
G1*G2*G3*G4
$40,000
Source: Forrester Research, Inc.
The controller’s ability to centrally manage access points reduced: 1) the administrative time to
troubleshoot and perform frequently scheduled wireless audit rotations, and 2) the effort to perform
site surveys to detect and eliminate rogue access point and mitigate security threats. As a result, it
also enabled interviewees to significantly reduce their help desk support costs within their
organizations. In the environment prior to the migration, these interviewed customers received as
many as 20 calls per day related to the wireless network, but after the migration, the numbers
dropped to approximately five calls per month. This shift impacted Tier 1 support as well as Tier 2
and Tier 3 support. Today, the majority of the calls are being managed by Tier 1 support or help
desk staff, and organizations have significantly reduced, and in some cases, eliminated the effort
previously required by Tier 2 and Tier 3 support.
To calculate this benefit, Forrester estimates that the composite organization responded to 1000
incidents annually prior to the migration and that it required 2 hours to rectify each incident. We
assume that prior to the migration 40% of incidents were managed by help desk and 60% by Tier 2
and Tier 3 support. After the migration, the support requests dropped; help desk saw a 40%
reduction in requests, and Tier 2 and Tier 3 support experienced an 85% reduction in support
requests. Table 11 demonstrates the annual cost savings of $88,000 for this category
(1000*2*(40%*40%*48+60%*85%*$72)).
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Total Economic Impact Study of Unified Wireless Network
Table 11: Reduction In Help Desk Support Costs
Ref.
Metric
Calculation
Per period
H1
Annual number of wireless incidents prior to migration
1000
H2
Average time to evaluate and address an incident
H3
Percent incidents handled by help desk
40%
H4
Percent incidents handled by Tier 2 and Tier 3 support
60%
H5
Reduction in help desk support
40%
H6
Reduction in Tier 2 and Tier 3 support
85%
H7
Average hourly rate for help desk support
$48
H8
Average hourly rate for Tier 2 and Tier 3 support
$72
Ht
Reduction in help desk support costs
2
H1*H2*(H3*H5*H7
+H4*H6*H8)
$88,800
Source: Forrester Research, Inc.
End-user Productivity Gain
In addition to IT cost savings, organizations that we interviewed sited end-user productivity gains
resulting from reduction in wireless outages. As wireless networks evolve and become a business
critical application, the importance of this benefit will continue to increase.
For this study, we estimate that the composite organization has 5000 employees. Based on the
access point distribution for the composite organization, in the autonomous environment each
access point outage affects approximately 15% of employees. To remain conservative, we estimate
that by reducing each outage, we can capture productivity gain of 25%. Table 12 illustrates this
calculation (5000*2*15%*25%*$48).
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Total Economic Impact Study of Unified Wireless Network
Table 12: End-User Productivity Gain
Ref.
Metric
I1
Total number of workers
I2
Average time per wireless incident
I3
Total number of access points
I4
Percent affected by wireless incident
I5
Percent of productivity captured
I6
Hourly rate per worker
It
Improvement in end-user productivity
Calculation
Per period
5,000
2
750
I3/I1
15%
25%
$48
I1*I2*I4*I5*I6
$18,000
Source: Forrester Research, Inc.
Guest Access Efficiencies
This category describes the IT and business benefits of using “Lobby Ambassador” services. Prior
to migration to Cisco Unified Wireless Network, the IT staff were responsible for setting up and
eliminating guest access for visitors. We assume that the organization receives 360 visitors
annually and prior to the migration, IT spent 30 minutes per visitor to log, set up, and eliminate
guest access. With an average fully loaded hourly salary of $48, we calculated a savings after the
migration of $8,640 annually (360*0.50*$48). Table 13 illustrates this calculation.
Table 13: Guest Access Set-Up And Monitor Cost Savings
Ref.
Metric
Calculation
Per period
J1
Annual number of third-party vendors
360
J2
Time required to set up and monitor guess accesses (hours)
0.50
J3
Hourly rate per worker (IT)
$48
Jt
Reduction in effort to set up and monitor guest accesses
J1*J2*J3
$8,640
Source: Forrester Research, Inc.
This category illustrates business benefits for visitors including lawyers, auditors, consultants, and
contractors who bill the organization for the hours of service provided. Prior to migration, these
individuals would spend an hour waiting to receive guest access. With an average hourly rate of
$150, we calculate the productivity gain of $27,000 (360*0.5*$150). Table 14 presents the
calculation.
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Total Economic Impact Study of Unified Wireless Network
Table 14: Visitors' Productivity Improvement
Ref.
Metric
Calculation
Per period
K1
Annual number of visitors
360
K2
Average time saving
0.50
K3
Average hourly rate per worker
$150
Kt
Improvement in visitors' productivity - cost to the business
K1*K2*K3
$27,000
Source: Forrester Research, Inc.
Total Benefits
Table 15 illustrates the total benefits for the composite organization to migrate to Cisco Unified
Wireless Network.
Figure 3: Total Benefits, Non-Risk-Adjusted
Benefits, Original Estimates
(Present Values)
Improvement in visitors'
productivity - cost to the
business
$67,145, 9%
Reduction in administrative
time to set up and monitor
guest accesses $21,486 , 3%
Improve end-user
productivity, $44,763 , 6%
Reduction in on-going
administrative cost
$265,775 , 37%
Reduction in helpdesk
support costs
$220,832 , 31%
Reduction in on-going RF
monitoring and rogue access
point detection
$99,474 , 14%
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Table 15: Total Benefits, Non-Risk-Adjusted
Benefits
Present
value
Year 1
Year 2
Year 3
Total
Reduction in on-going administrative
cost
$106,872
$106,872
$106,872
$320,616
$265,775
Reduction in on-going RF monitoring
and rogue access point detection
$40,000
$40,000
$40,000
$120,000
$99,474
Reduction in help desk support costs
$88,800
$88,800
$88,800
$266,400
$220,832
Improvement in end-user productivity
$18,000
$18,000
$18,000
$54,000
$44,763
Reduction in administrative time to set
up and monitor guest accesses
$8,640
$8,640
$8,640
$25,920
$21,486
Improvement in visitors' productivity —
cost to the business
$27,000
$27,000
$27,000
$81,000
$67,145
$289,312
$289,312
$289,312
$867,936
$719,475
Total
Source: Forrester Research, Inc.
Risk
Risk is the third component within the TEI model; it is used as a filter to capture the uncertainty
surrounding different cost and benefit estimates. If a risk-adjusted ROI still demonstrates a
compelling business case, it raises confidence that the investment is likely to succeed because the
risks that threaten the project have been taken into consideration and quantified. The risk-adjusted
numbers should be taken as “realistic” expectations, since they represent the expected values
considering risk. In general, risks affect costs by raising the original estimates, and they affect
benefits by reducing the original estimates.
For the purpose of this analysis, Forrester risk-adjusts cost and benefit estimates to better reflect
the level of uncertainty that exists for each estimate. The TEI model uses a triangular distribution
method to calculate risk-adjusted values. To construct the distribution, it is necessary to first
estimate the low, most likely, and high values that could occur within the current environment. The
risk-adjusted value is the mean of the distribution of those points.
Forrester defines two types of investment risk associated with this analysis: implementation and
impact risk. Implementation risk is the risk that a proposed technology investment may deviate
from the original resource requirements needed to implement and integrate the investment,
resulting in higher costs than anticipated. Impact risk refers to the risk that the business or
technology needs of the organization may not be met by the technology investment, resulting in
lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes
for cost and benefit estimates. Quantitatively capturing investment risk by directly adjusting the
financial estimates results in a more meaningful way and offers a more accurate projection of the
return on investment.
The following general management and process risks were considered in this study:
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Total Economic Impact Study of Unified Wireless Network
•
Planning, installation, and testing could demand more time than originally anticipated.
•
Forrester did not evaluate the cost and benefits associated with any next generation
equipment. However interviewees are considering the future cost of next generation
upgrades to their equipment, and they are concerned that the acquisition costs of next
generation equipment may exceed their benefits.
The following risk specific to Cisco’s Unified Wireless Network was considered in this study:
•
End-user productivity gains may vary from originally anticipated estimates due to the
specific characteristics of an organization’s wireless deployment and usage prior to
migration.
The following tables show the values used to adjust for uncertainty in cost and benefit estimates.
Based on the comments from the interviewed customer, we applied risk to the benefit categories to
adjust for any uncertainty but did not apply any risk to the cost categories. Forrester uses list prices
for all software licensing, maintenance fees, and hardware costs. The professional services costs
typically pose the greatest uncertainty, and in this case, they were very minimal.
Table 16: Total Costs, Risk-Adjusted
Costs
Total costs of access points
Initial
Year 1
Year 2
Year 3
Total
Present
value
($39,950)
($39,950)
($39,950)
($242,970)
($242,970)
($242,970)
WCS license fees
($46,950)
($46,950)
($46,950)
Initial and on-going
administrative cost
($1,469)
($2,311)
($2,311)
($2,311)
($8,402)
($7,216)
($331,339)
($2,311)
($2,311)
($2,311)
($338,272)
($337,086)
Total cost to implement
controllers
Total costs
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Table 17: Total Benefits, Risk-Adjusted
Benefits
Year 1
Year 2
Year 3
Total
Present
value
Reduction in on-going administrative cost
$96,185
$96,185
$96,185
$288,554
$239,197
Reduction in on-going RF monitoring and
rogue access point detection
$36,000
$36,000
$36,000
$108,000
$89,527
Reduction in help desk support costs
$79,920
$79,920
$79,920
$239,760
$198,749
Improvement in end-user productivity
$16,200
$16,200
$16,200
$48,600
$40,287
$7,776
$7,776
$7,776
$23,328
$19,338
$24,300
$24,300
$24,300
$72,900
$60,431
$260,381
$260,381
$260,381
$781,142
$647,529
Reduction in administrative time to set up
and monitor guest accesses
Improvement in visitors' productivity —
cost to the business
Total benefits
Source: Forrester Research, Inc.
Flexibility
Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could
be turned into business benefit for some future additional investment. Flexibility benefits typically
increase with the scalability of the technology investment. This provides an organization with the
“right” or ability to engage in future initiatives but not the obligation to do so. In the case of this
investment, a customer might choose to purchase additional services including location tracking
with the intention of future scalability.
One of the interviewed organizations — a medical device manufacturer — has implemented
location tracking services to support quality assurance processes when it activated RFID within its
manufacturing facility. Every unit and/or package is read and marked electronically before being
shipped to doctors and hospitals and after it is received by the organization from doctors or
hospitals. The quality assurance unit monitors and identifies units completed and shipped with
100% certainty. This has resulted not only in reduction in loss of items but also reduced time and
effort to track and monitor each product within each package. Knowing that the units are shipped
correctly with 100% certainty provides information required to recover a loss. Flexibility could also
be quantified if evaluated as part of a specific project (described in more detail in Appendix A).
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Total Economic Impact Study of Unified Wireless Network
TEI Framework: Summary
Considering the financial framework constructed above, the results of the costs, benefits, risk, and
flexibility sections using the representative numbers can be used to determine a return on
investment, net present value, and payback period.
Table 18 and 19 present the risk-adjusted values after applying the risk-adjusted method indicated
in the Risk section.
It is important to note that values used throughout the TEI Framework are based on in-depth
interviews with four organizations and the resulting composite organization built by Forrester.
Forrester makes no assumptions as to the potential return that other organizations will receive
within their own environment. Forrester strongly advises that readers use their own estimates within
the framework provided in this study to determine the expected financial impact of migrating to
Unified Wireless Network.
Table 18: Summary Financial Non-Risk-Adjusted Cash Flow
Category
Total costs
Initial
($331,502)
Total benefits
Total (non-risk-adjusted)
Return on investment
($331,502)
Year 3
Total
Present
value
Year 1
Year 2
($2,568)
($2,568)
($2,568)
($339,206)
($337,888)
$289,312
$289,312
$289,312
$867,936
$719,475
$286,744
$286,744
$286,744
$528,730
$381,587
Year 3
Total
113%
Payback period (months)
14
Source: Forrester Research, Inc.
Table 19: Summary Financial Risk-Adjusted Cash Flow
Category
Total costs
Initial
($331,339)
Total benefits
Total (non-risk-adjusted)
Return on investment
Payback period (months)
($331,339)
Present
value
Year 1
Year 2
($2,311)
($2,311)
($2,311)
($338,272)
($337,086)
$260,381
$260,381
$260,381
$781,142
$647,529
$258,070
$258,070
$258,070
$442,870
$310,443
92%
15
Source: Forrester Research, Inc.
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Total Economic Impact Study of Unified Wireless Network
Study Conclusions
Forrester’s in-depth interviews with Cisco’s Unified Wireless Network customers yielded several
important observations:
Based on information collected in interviews with current Unified Wireless Network customers,
Forrester found that by standardizing and centrally managing the wireless network, these
organizations have: 1) improved network security; 2) reduced on-going administrative effort; 3)
improved end-user productivity and 4) improved third-party guest access.
The financial analysis provided in this study illustrates the potential way an organization can
evaluate the value proposition of Cisco’s product. Based on information collected in four in-depth
customer interviews, Forrester calculated a three-year risk-adjusted ROI of 92% for the composite
organization with a payback period of 15 months. All final estimates are risk-adjusted to incorporate
potential uncertainty in the calculation of costs and benefits.
Based on these findings, companies looking to migrate to Cisco’s Unified Wireless Network can
expect productivity benefits and cost savings. Using the TEI framework, many companies may find
the potential for a compelling business case to make such an investment.
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Total Economic Impact Study of Unified Wireless Network
Appendix A: Total Economic Impact™ Overview
Total Economic Impact is a methodology developed by Forrester Research that enhances a
company’s technology decision-making processes and assists vendors in communicating the value
proposition of their products and services to clients. The TEI methodology helps companies
demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and
other key business stakeholders.
The TEI methodology consists of four components to evaluate investment value: benefits, costs,
risks, and flexibility. For the purpose of this analysis, the impact of flexibility was not quantified.
Benefits
Benefits represent the value delivered to the user organization — IT and/or business units — by the
proposed product or project. Often product or project justification exercises focus just on IT cost and
cost reduction, leaving little room to analyze the effect of the technology on the entire organization.
The TEI methodology and the resulting financial model place equal weight on the measure of
benefits and the measure of costs, allowing for a full examination of the effect of the technology on
the entire organization. Calculation of benefit estimates involves a clear dialogue with the user
organization to understand the specific value that is created. In addition, Forrester also requires that
there be a clear line of accountability established between the measurement and justification of
benefit estimates after the project has been completed. This ensures that benefit estimates tie back
directly to the bottom line.
Costs
Costs represent the investment necessary to capture the value, or benefits, of the proposed project.
IT or the business units may incur costs in the forms of fully burdened labor, subcontractors, or
materials. Costs consider all the investments and expenses necessary to deliver the proposed
value. In addition, the cost category within TEI captures any incremental costs over the existing
environment for ongoing costs associated with the solution. All costs must be tied to the benefits
that are created.
Risk
Risk measures the uncertainty of benefit and cost estimates contained within the investment.
Uncertainty is measured in two ways: the likelihood that the cost and benefit estimates will meet the
original projections and the likelihood that the estimates will be measured and tracked over time.
TEI applies a probability density function known as “triangular distribution” to the values entered. At
a minimum, three values are calculated to estimate the underlying range around each cost and
benefit.
Flexibility
Within the TEI methodology, direct benefits represent one part of the investment value. While direct
benefits can typically be the primary way to justify a project, Forrester believes that organizations
should be able to measure the strategic value of an investment. Flexibility represents the value that
can be obtained for some future additional investment building on top of the initial investment
already made. For instance, an investment in an enterprisewide upgrade of an office productivity
suite can potentially increase standardization (to increase efficiency) and reduce licensing costs.
However, an embedded collaboration feature may translate to greater worker productivity if
activated. The collaboration can only be used with additional investment in training at some future
point in time. However, having the ability to capture that benefit has a present value that can be
estimated. The flexibility component of TEI captures that value.
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Total Economic Impact Study of Unified Wireless Network
Appendix B: Glossary
Discount rate: The interest rate used in cash flow analysis to take into account the time value of
money. Although the Federal Reserve Bank sets a discount rate, companies often set a discount
rate based on their business and investment environment. Forrester assumes a yearly discount rate
of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on
their current environment. Readers are urged to consult their organization to determine the most
appropriate discount rate to use in their own environment.
Net present value (NPV): The present or current value of (discounted) future net cash flows given
an interest rate (the discount rate). A positive project NPV normally indicates that the investment
should be made, unless other projects have higher NPVs.
Present value (PV): The present or current value of (discounted) cost and benefit estimates given
at an interest rate (the discount rate). The PV of costs and benefits feed into the total net present
value of cash flows.
Payback period: The breakeven point for an investment, or the point in time at which net benefits
(benefits minus costs) equal initial investment or cost.
Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is
calculated by dividing net benefits (benefits minus costs) by costs.
A Note On Cash Flow Tables
The following is a note on the cash flow tables used in this study (see the Example Table below).
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1.
Those costs are not discounted. All other cash flows in Years 1 through 3 are discounted using the
discount rate shown in Table 2 at the end of the year. Present value (PV) calculations are
calculated for each total cost and benefit estimate. Net present value (NPV) calculations are not
calculated until the summary tables and are the sum of the initial investment and the discounted
cash flows in each year.
Example Table
Ref.
Category
Calculation
Initial cost
Source: Forrester Research, Inc.
- 25 -
Year 1
Year 2
Year 3
Total